reconafrica – con africa

Viceroy Research Group 1 viceroyresearch.com

ReconAfrica – Con Africa ReconAfrica ’s micro-response to our report contains zero facts, addresses none

of Viceroy ’s pertinent questions, and is loaded with promotion al language.

JUNE 29, 2021 – On June 28, 2021, Reconnaissance Energy Africa responded to Viceroy Research’s report, titled

“ReconAfrica – No Oil? Pump Stock” (Report - June 24, 2021), which can be found on the link below:

https://viceroyresearch.org/2021/06/24/reconafrica-no-oil-pump-stock/

Given RECO’s penchant for stock promotion and operational opaqueness it was entirely unsurprising that RECO

management’s response to our Report was loaded with promotional language (including anchoring statements

to specialists they perceive to be reputable), addressed no specific issues raised in our report, and provided

zero new data for investors.

▪ RECO fails to provide any further information on the in-progress 6-1 and complete 6-2 wells, including the

depth of the 6-2 well, the age of the rock in which they claim shows, show depth, and wireline

/petrophysical data from the wells.

- This key data is immediately available and would allow investors to judge whether their geological

model is correct, or as we believe, a work of fantasy.

- Given RECO’s penchant self-promotion: the only reason this data has not been released it because

the wells were failures. RECO nonetheless continue an opaque charade destroying shareholder funds.

▪ Despite widespread consensus that seismic studies should be performed before drilling, RECO talk

themselves into a logical fallacy that the opposite is the proper method for this deposit.

- An appropriate seismic analysis would almost certainly prove or disprove their basin model straight

away. If the seismic results showed a very thin sediment pile, you could pack up the project immediately

without the need to drill any costly and damaging wells.

- RECO do not even appear to have applied for an appropriate seismic analysis permit. It’s proposed

weight-drop systems are popular in the Canada oil sands when looking a few hundred meters deep and

require a smaller cut line to acquire. They are ill suited to look for basins as deep as RECO claim, on

proposed seismic lines up to 50km apart.

- RECO hilariously insist stratigraphic wells are appropriate and used “for generations”. This method of

wildcat exploration largely outdated and even in the 70s was conducted in proven basins where

hydrocarbons were already being extracted. This method was used “generations ago”, not “for

generations”.

- RECO are clearly drilling blind: the grifters behind the curtain who suggest otherwise show immense

disrespect to the fragile and important environment they are destroying, and the people of Namibia.

▪ RECO defends its infatuation of self-titled “Kavango Basin” by referring investors to the man who identified

the basin: RECO Technical Team employee Bill Cathey.

- In fact, every field matter expert RECO continuously anchors itself to on promotional press releases

appears to be an insider, as we alluded to in our original Report. This includes “founding shareholder”

Dan Jarvie.

▪ RECO suggests it is not a pump and dump, stating that management have bravely purchased shares, which

were in fact stock options issued with no transparent compensation plan, exercised at up to 90%

discounts.

- Meanwhile a similar dollar-value of shares were unloaded to the open market by RECO management.

- RECO refuse to acknowledge and further disclose shadow directors and related party transactions. This

includes the absurd Renaissance transaction and enrichment of insiders playing both sides of the deal

(and fleecing RECO shareholders).

https://viceroyresearch.org/2021/06/24/reconafrica-no-oil-pump-stock/


RECO completely fail to address, among many other things:

▪ Management’s appalling ecological and operational track record including Chairman Jay Park’s implication

in bribery scandals, or shadow director Craig Steinke’s disastrous environmental record.

▪ Employment or retainer of Knowledge Katti, a Namibian businessman previously embroiled in a bribery

scandal for mining companies in Namibia.

▪ RECO’s failure to observe industry best practices regarding wastewater disposal, evidenced by the

National Geographic.

▪ RECO’s backflipped plan to frack in Namibia, highlighted in all their commissioned feasibility studies and

environmental assessment studies, and basis for estimate valuations sent to shareholders in paid-

promotional material

▪ Promotional articles sponsored by the company targeting unsophisticated investors, costing the company

hundreds of thousands, if not millions, of dollars.

We reiterate that once RECO’s promotional veil has been pulled back, we believe the company will revert to

trading as a speculative, but highly unimpressive, penny-stock.

Line your pits


Attention: Whistleblowers

Viceroy encourage any parties with information pertaining to misconduct within Reconnaissance Energy Africa Ltd, its

affiliates, or any other entity to file a report with the appropriate regulatory body.

We also understand first-hand the retaliation whistleblowers sometimes face for championing these issues. Where possible,

Viceroy is happy act as intermediaries in providing information to regulators and reporting information in the public interest

in order to protect the identities of whistleblowers.

You can contact the Viceroy team via email on [email protected].

About Viceroy

Viceroy Research are an investigative financial research group. As global markets become increasingly opaque and complex

– and traditional gatekeepers and safeguards often compromised – investors and shareholders are at greater risk than ever

of being misled or uninformed by public companies and their promoters and sponsors. Our mission is to sift fact from fiction

and encourage greater management accountability through transparency in reporting and disclosure by public companies

and overall improve the quality of global capital markets.

Viceroy Research LLC is not associated with any environmental activists.

Viceroy Research LLC has made this report available to the SEC, CSA, The UK SFO, The Namibian Government, BaFin and

IIROC.

Important Disclaimer – Please read before continuing

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1. ReconAfrica was the first to recognize the deep Kavango Basin as a distinct

geological feature.

RECO make the following statement regarding its infatuation with the Kavango Basin, loaded with anchoring

statements and promotional language, presenting no new or relevant data:

Figure 1 ReconAfrica Responds to Short Seller's Biased and False Short Report – 28 June, 2021

Earthfield – A RECO related party

Bill Cathey, one of 2 employees in the Earthfield Technology family business, is an employee of RECO and early

shareholder. In its response, RECO self-admit that its now-employee “defined [Kavango] as geophysically

separate from the Owambo Basin”. We stand behind our statement, and do not understand why this is a point

of contention.

Figure 2 Extract from RECO’s website1

In fact, every field matter expert RECO continuously anchors itself to on promotional press releases

appears to be an insider, as we alluded to in our original Report.

Even Daniel Jarvie is introduced by Jay Park as a FOUNDING SHAREHOLDER of RECO2.

Despite commissioning this data in the 90’s, none of NAMCOR or any NAMGOV’s geological maps or exploration

allotment maps define this basin. NAMCOR’s website, still does not list the Kavango Basin as an existing

sedimentary basin in Namibia. RECO bought this data in 2013.

Figure 3 Extract from NAMCOR’s website3

1 https://web.archive.org/web/20210628150052/https://reconafrica.com/about/technical-team/ 2 https://www.youtube.com/watch?v=AB8AfUCWiIg 3 https://web.archive.org/web/20210122005802/https://www.namcor.com.na/history/

https://web.archive.org/web/20210628150052/https:/reconafrica.com/about/technical-team/

https://web.archive.org/web/20210122005802/https:/www.namcor.com.na/history/


Elaborating on available Gravity Data

Gravity data (also commissioned by NAMGOV) shows that RECO are drilling exploration wells in gravity highs,

which makes no sense to Viceroy or its industry expert consultants. Free air gravity anomaly shows the difference

between the theoretical and actual gravity field.

RECO extrapolate only magnetic data to announce the discovery of a 9,000m deep basin, despite gravity highs

suggesting the basin will be shallower than Etosha Petroleum’s ST-1 well in 1964.

Below is a superposition of aeromagnetic and gravity maps as well as the location of wells in the region including

RECO’s 6-1 and 6-2 wells as well as its planned 5-2 and 5-6 wells. The contour lines denote the free air gravity

level in 5 milligal contour intervals. The 6-1 and 6-2 wells are shown to be drilling on a +20 milligal contour gravity

high, where the ST-1 well was drilled within a -25 milligal contour gravity low.

Strangely Recon's 5-2 and 5-6 wells are planned to drill on an even higher free air gravity level than the 6-1 and

6-2 wells.

Figure 4 Superposition of Free Air Gravity Anomaly and Aeromagnetic data with drill locations

RECO have this data; they mention it in several scoping reports but appear to be ignoring it. What is clear is that

RECO’s rebuttal does little to assuage our doubt that the Kavango basin touted by RECO bears any similarity to

reality.

As usual, RECO present zero new data and hinge update on promotional language and anchoring bias.


2. ReconAfrica worked to first establish the existence of a working petroleum

system

RECO make the following statement regarding its misguided “logical” reasoning behind drilling blind in one of

the world’s most unique and delicate environments:

Figure 5 ReconAfrica response to short seller’s biased and false short report – 28 June, 2021

“Logical” fallacy

It is a logical fallacy to suggest that, instead of drilling where seismic data would suggest a reservoir exists, RECO

should first drill to “understand the sedimentology”. The sequencing of the exploration process is widely known

and understood - even the most rudimentary resource on oil and gas exploration spells this out. The image

below comes from a beginner’s textbook on hydrocarbon exploration. We seriously doubt that ReconAfrica is

challenging accepted methodology on this point.

Figure 6 Hydrocarbon Exploration and Production 2nd edition by Jahn, Cook and Graham

We believe that ReconAfrica’s real reason for delaying 2d seismic surveys are because their results would almost

certainly disprove their basin model.


Stratigraphic Wells

As we mentioned in our original report, stratigraphic wells have been used to drill blind, but by far larger and

better capitalized companies than RECO. This method of wildcat exploration is also largely outdated and even

then, was conducted in proven basins where hydrocarbons were already being extracted. This method was used

generations ago, not “for generations”.

The company also mentions that the nearest stratigraphic well was 375km away but had no problem

extrapolating the Kavango basin’s composition from areas in South Africa 1,500km away or in some cases even

not on the same continent. Later in their response ReconAfrica director James Granath mentions the Middle

East Zagros belt before backpedaling to avoid comparison. Management clearly believe that simply naming other

producing fields is enough to strike oil.

Figure 7 ReconAfrica response to short seller’s biased and false short report – 28 June 2021

To be abundantly clear: drilling wells before conducting seismic analysis is absolutely not normal, nor is it logical.

RECO are clearly drilling blind, and the grifters behind the curtain who suggest otherwise show immense

disrespect to the fragile and important environment they are destroying, and the people of Namibia.


4. Results from the of Initial Stratigraphic Test Wells confirms a working petroleum

system.

RECO make the following statement regarding its test well results, loaded with anchoring statements and

promotional language, presenting no new or relevant data.

Figure 8 ReconAfrica response to short seller’s biased and false short report – 28 June 2021

RECO has failed to provide any further detail on these wells including basic, immediately available data that

would quite quickly dismiss investor concern:

▪ The depth of the 6-2 well.

▪ The age of the rock in which they claim shows.

▪ The depth at which they encountered those intervals and the length of each interval.

▪ Wireline/petrophysical logs

Given RECO’s penchant for wild and unchecked self-promotion, we believe the omission of this data is due to its

incompatibility with their claims of a deep basin, instead intercepting shows far below their target depth.

As mentioned above, based on gravity maps the company is drilling into a gravity high making it far more likely

that the sediment pile is far thinner than expected. The company appears to continue this lack of this disclosure

with its 6-1 well.

RECO is so unsure of its well results that it included them in the disclaimer for its rebuttal to the National

Geographic, as well as its Renaissance acquisition and its commitment to ESG.

To be abundantly clear: RECO already has this data: this should NOT qualify as a forward-looking statement.

Figure 9 ReconAfrica responds to National Geographic’s” Hit Piece” by Environmental Activists

Viceroy will not respond to hearsay conjecture RECO have provided in its response by related and conflicted

parties under the guise of independent specialists (but you would smell petroleum in a diesel-powered well-

site).


5. ReconAfrica and NAMCOR are now pursuing commercial potential of the

Kavango Basin.

RECO make the following statement regarding “logical” steps in its exploration project, loaded with anchoring

statements and promotional language, presenting no new or relevant data.


RECO anticipates a cost of >USD4.5m for seismic analysis of a relatively miniscule area in relation to their total

lease exploration area. This is far, far less than the cost of drilling two, unsuccessful dry wells. Their August 2020

prospectus forecast a total cost of two wells of CAD8.941m (USD7.23m).

Figure 11 ReconAfrica Prospectus dated August 2021

From a commercial perspective, it makes no sense that the cheaper seismic survey was not completed first or

that the permitting process was left this late.

It would almost certainly prove or disprove their basin model straight away. If the seismic results showed a

very thin sediment pile, you could pack up the project immediately without the need to drill any costly wells.


As mentioned prior, a 450km 2d seismic survey covers a negligible portion of the lease are as shown below in a

RECO planning document. These lines are also far too far apart to yield any real resolution; exploration grids

typically have 1-5km between lines.

Figure 12 Detailed location of the proposed 2D seismic survey lines and key exploration Area of Interest within PEL 73

It is unfathomable that RECO will continue to blow shareholder capital without releasing ANY well data to

investors. It would be easy to challenge Viceroy on this point. The reason they have not released this data is

because the wells were failures, as is their geological model.

Weight drop

Industry experts consulted by Viceroy also noted that the company’s choice of a weight-drop system for 2Dd

seismic surveys was puzzling. While these systems are popular in the Canada oil sands when looking a few

hundred meters deep and require a smaller cut line to acquire, they are ill suited to look for a basin as deep as

that RECO is claiming.

We were advised that the Polaris 860 rig used by RECO is generally used to image within the 1,000 – 2,000m

depth range, and marketing materials for the Polaris bear this out. We question why RECO chose such a rig when

drilling to depths of 3,800m.

Figure 13 Seismic weight drop quest leads to improved data, costs, footprint4

We are sure RECO will point to the reduced environmental impact of weight drop systems however in this case

the survey will be conducted along roads leaving roughly the same footprint. It makes no sense.

Cash

RECO’s cash balance largely stems from a bought-deal arrangement with Haywood securities, considering of

warrants immediately exercisable at ~$9.50. RECO have unwittingly created a perfect storm whereby Haywood’s

risk management must now consider whether to hold stock in a company consistently lying to shareholders in a

forced-seller scenario.

4 http://www.polarisgeo.com/uploads/PDF/Oil%20and%20Gas%20Article%20March%202004.pdf

http://www.polarisgeo.com/uploads/PDF/Oil%20and%20Gas%20Article%20March%202004.pdf


Figure 14 ReconAfrica Q1 Financial Summary

6. The Petroleum Agreement

RECO make the following statement regarding its extensions in relinquishing their petroleum block, using

anchoring statements and promotional language, presenting no new or relevant data.


▪ We made it clear that RECO could effectively “pick and choose” which areas to keep but have little hope of

knowing with any certainty which areas would be worth keeping. It is abundantly clear that the justification

for drilling wells has less to do with gathering information and more to do with fulfilling lease requirements

and issuing promotional press releases.

▪ RECO exclusions subject to an application for the declaration of a petroleum field are a moot point. RECO

has consistently hid its exploration results from shareholders, and it is unfathomable that such an

application will be made and approved for dry wells.

▪ RECO conveniently glosses over the timing of their relinquishment of 75% of the lease area: 50% following

the completion of the second well (forecast from the end of July 2021) and a further 25% at the end of the

first renewal period!


8. “Net Buyers”

RECO make the following statement regarding its management being granted options and selling stock, using

anchoring statements and promotional language, presenting no new or relevant data.

Figure 16 ReconAfrica Responds to Short Seller's Biased and False Short Report – 28 June 2021

▪ RECO appear to suggest that management’s “purchase” of 985k shares was something other than vested

stock options, for which the average issue price was CAD0.80 across the period. All management stock sales

have been on-market at average prices of ~CAD6.63, an 730% premium to the average issue price, with

selling all the way up to CAD10.08.

▪ RECO suggests that because the company stock price has risen by >1,300% in the past 12 months, this is

indicative that RECO is not a pump and dump.

▪ Management completely ignore Viceroy’s pertinent questions relating to the fleecing of investors,

including:

- The terms under which these options were issued, and what performance milestones must be met for

vesting rights.

- The acknowledgement and further disclosures of shadow directors and related party transactions. This

includes the absurd Renaissance transaction and enrichment of insiders playing both sides of the deal.


Conclusion

RECO have failed to adequately address the points raised in our original report. Apart from several glowing

statements from insiders, their response contains no new information. The company failed to address at all:

▪ Management’s appalling ecological and operational track record including Chairman Jay Park’s implication

in bribery scandals, or shadow director Craig Steinke’s disastrous environmental record.

▪ Employment or retainer of Knowledge Katti, a Namibian businessman previously embroiled in a bribery

scandal for mining companies in Namibia.

▪ RECO’s backflipped plan to frack in Namibia, highlighted in all their commissioned feasibility studies and

environmental assessment studies, and basis for estimate valuations sent to shareholders in paid-

promotional material.

▪ Promotional articles sponsored by the company targeting unsophisticated investors, costing the company

hundreds of thousands, if not millions, of dollars.

This is not the first time the company has issued a disappointing response. In its responses to the Globe and Mail

and the National Geographic RECO failed to present any information to rebut or disprove the articles in question,

resorting to name-calling and spinning old information as new.

We reiterate our belief that it is extremely unlikely that RECO finds a commercially viable petroleum system and

even less likely that they can capitalize on it. Ultimately, we believe the company will revert to trading as an

unremarkable penny stock.

reconafrica – con africa

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